Tag Archives: Funds

M’sian property major sharpens S’pore thrust

Posted on 19 Nov 2009 | Comments Off on M’sian property major sharpens S’pore thrust

Starhill Global acquiring $571m of assets in big YTL revamp

YTL Corp, Malaysia’s biggest property group, is restructuring its RM8 billion (S$3.3 billion) property trust and hotel portfolio, which includes the Singapore-listed trust Starhill Global Reit.

Starhill Global Reit, which will focus on retail, will buy two malls in Kuala Lumpur from YTL’s Malaysia-listed trust Starhill Reit for $423.3 million.

The Singapore trust will also acquire the David Jones Building in Perth, Australia, for $148 million.

‘This exercise will restructure the RM8 billion in retail and hotel assets currently under our control into two distinct Reit portfolios – the hospitality Reit in Malaysia and the retail-centric Reit in Singapore, which will benefit both Reits in terms of pursuing growth and development strategies in a single, focused class of assets,’ said YTL managing director Francis Yeoh.

With the proposed acquisition of the three properties, Starhill Global Reit’s total portfolio size will grow to $2.5 billion. Its footprint will also be extended to Malaysia and Australia, diluting the geographic concentration risk. The trust’s portfolio now comprises 10 properties in Singapore, Japan and China valued at about $2 billion in total.

Starhill Global Reit also said in a separate announcement that it has terminated the master leases and property management agreements for seven properties in Japan to ‘mitigate tenant concentration risks’.

Dr Yeoh said that YTL’s long-term vision is for Starhill Global Reit to be the main YTL-linked vehicle for the ownership of prime retail and commercial properties.

On its part, Malaysia-listed Starhill Reit will instead focus on the hospitality business after selling the two malls. Hotel assets with the potential to be injected into the Reit include The Ritz-Carlton in Kuala Lumpur and The Majestic Malacca.

‘From the global standpoint, we see tremendous opportunities for Starhill Reit to acquire high-end assets in key international hot spots, including Bali, Saint Tropez, Phuket and other world-class destinations,’ said Dr Yeoh.

The two malls bought by Starhill Global Reit from Starhill Reit – Starhill Gallery and Lot 10 Shopping Centre – have a total net lettable area of 554,165 sq ft. They will be bought using an asset-backed securitisation structure.

Starhill Global Reit also said that Katagreen Development, a wholly-owned subsidiary of YTL Corp, will be the master lessee in both properties with a tenure. The master lease will incorporate a step-up rental feature every three years.

David Jones Building in Perth will be acquired from Centro, a real estate company based in Australia. David Jones, a department store, has a lease in the building until October 2032. It now occupies about 95 per cent of the total gross lettable area of the building and accounts for 75 per cent of the annual gross rental.

The proposed Australian acquisition is expected to be completed in January 2010 and will be funded by a combination of debt and proceeds raised from Starhill Global Reit’s recent rights issue.

Starhill Global Reit was formerly known as Macquarie Prime Reit, and was listed in 2005 with an initial portfolio that included stakes in Singapore malls Ngee Ann City and Wisma Atria.

The property trust’s name was then changed after YTL Corp in October 2008 took over the Macquarie Group’s 26 per cent stake in an all-cash deal worth $285 million.

YTL Corp has been expanding aggressively in Singapore. In 2008, it landed Singapore’s second largest generating company, the 3,100-megawatt PowerSeraya, for $3.8 billion.

Source : Business Times – 19 Nov 2009

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MI-Reit manager hits out at rival CIT’s proposal

Posted on 19 Nov 2009 | Comments Off on MI-Reit manager hits out at rival CIT’s proposal

Subordinated loan likely more pricey than MI-Reit’s cost of equity

THE battle for control of MacArthurCook Industrial Reit (MI-Reit) continued yesterday with MI-Reit’s manager Nicholas McGrath slamming a rival proposal from Cambridge Industrial Trust (CIT) as ‘entirely ingenuous’.

MI-Reit is asking unitholders to approve next Monday a $430 million rescue package involving a share placement to ‘cornerstone’ investors, a rights issue, and $215 million in new loans.

The troubled Reit needs the money to refinance $226 million in loans and meet a $90 million obligation to buy the 1A International Business Park (IBP) property, both by the end of the year.

But CIT, which bought a 9.76 per cent stake in MI-Reit after the announcement of the rescue package and is angling to take over management of MI-Reit, said the recapitalisation exercise destroyed value for unitholders as the discount to net asset value was too steep.

Non-sponsor existing unitholders post-transaction would be left with just 40 per cent of total holdings, CIT said, from over 70 per cent at present.

It is instead proposing itself as manager of MI-Reit and has pledged an ‘initiative to take advantage of an enlarged pool of assets to benefit all investors’, Chris Calvert, chief executive officer of its manager, said on Tuesday.

He said MI-Reit investors would benefit from access to a subordinated loan facility which CIT holds, and which it could use to fully pay off its $90 million obligation to buy the IBP property.

But in an interview yesterday with BT, Mr McGrath said a subordinated loan would likely be more expensive than MI-Reit’s cost of equity and much higher than the 350 to 450 basis points over Sibor that it will pay for its negotiated term loan.

Mr McGrath added that MI-Reit’s aggregate leverage would increase, while CIT, with just $13 million in cash, has little debt overhead to increase its own gearing. ‘Any which way you put it, they will need to do capital raising and so far they’ve said nothing about that,’ he said.

He admitted that an orderly sale of MI-Reit’s assets – which has been suggested in some quarters, as its units are trading far below net asset value – might realise close to market value, or about 90 cents per unit. ‘But I’m entirely uncomfortable with losing control of the process,’ Mr McGrath said, adding that if creditors force a quick firesale, investors might be left with nothing.

The steep discounts were necessary because the Reit had to urgently raise a minimum of $125 million – twice its market capitalisation in June – to rebalance its capital structure so that it could take on new loans, Mr McGrath said.

In a report released on Tuesday, Phillip Securities analyst Lee Kok Joo said that whatever the outcome of the extraordinary general meeting on Monday, ‘the risk is more on the part of CIT unitholders rather than MI-Reit unitholders’ but said the proposal opens up the possibility that MI-Reit unitholders’ stakes would not be heavily diluted.

According to its calculations, MI-Reit offers a potential FY2011 distribution per unit (DPU) of 1.89 cents, which translates into a dividend yield of 11 per cent based on the rights price of 15.9 cents, if the proposed transactions go through. ‘For investors who are not keen, we maintain our ’sell’ recommendation,’ Phillips said.

Source : Business Times – 19 Nov 2009

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